Q3 2024 Evercore Inc Earnings Call
Please standby your program is about to begin.
Speaker Change: Good morning, and welcome to the Evercore third quarter 2024 earnings Conference call. Today's call is scheduled to last about one hour, including remarks by Evercore management and the question and answer session in order to ask a question. Please press the star key followed by the number one on your telephone keypad I will now turn the call over to Katie Hayes for managing.
Speaker Change: Director of Investor Relations and ESG at Evercore. Please go ahead.
Katie Hayes: Thank you operator, good morning, and thank you for joining us today and for Evercore third quarter 2024 financial results Conference call.
Speaker Change: Hamer Evercore head of Investor Relations and ESG joining me on the call today is John Weinberg, our chairman and CEO and Jim <unk>, our CFO. After our prepared remarks, we will open up the call for questions.
Speaker Change: Earlier today, we issued a press release announcing Evercore third quarter 2024 financial results.
Speaker Change: Our discussion of our results today is complementary to the press release, which is available on our website at Evercore Dot Com. This conference call is being webcast live in the for investors section of our website and an archive of it will be available for 30 days beginning approximately one hour after the conclusion of this call.
Speaker Change: During the course of this conference call. We may make a number of forward looking statements any forward looking statements that we make are subject to various risks uncertainties and there are important factors that could cause actual outcomes to differ materially from those indicated in these statements.
Speaker Change: These factors include but are not limited to those discussed in everquest filings a P C.
Speaker Change: Including our annual report on Form 10-K quarterly reports on Form 10-Q, and current reports on form 8-K, I want to remind you that the company assumes no duty to update any forward looking statements.
Speaker Change: In our presentation today, unless otherwise indicated we will be discussing adjusted financial measures, which are non-GAAP measures that we believe are meaningful when evaluating the company's performance for.
Speaker Change: For detailed disclosures on these measures and the GAAP reconciliations you should refer to the financial data contained within our press release, which is posted on our website.
Speaker Change: You need to believe that it is important to evaluate our record performance on an annual basis.
Speaker Change: As we've noted previously our results for any particular quarter are influenced by the timing of transaction closing and now I'll turn the call over to John.
John Weinberg: Thank you Katie and good morning, everyone.
John Weinberg: We're pleased to be doing this quarter's earnings call from our London headquarters.
John Weinberg: We had a strong quarter as our revenues continue to build the firm generated approximately $740 million and adjusted net revenues up 28% versus the prior year period, driven by continued improvement in both the macroeconomic environment and capital markets.
John Weinberg: The interest rate picture has begun to clarify as the fed lowered rates for the first time since its rapid rate hikes began in early 2022.
John Weinberg: We believe we are in the midst of a recovery, albeit gradual which will pave the way for a healthy multiyear cycle across the advisory and capital markets businesses industry wide.
John Weinberg: Although uncertainty persists, particularly with respect to the upcoming U S election, and geopolitical tensions broad market activity and our internal metrics continue to strengthen further supporting our robust backlogs and positioning us for what we believe can be an active 2025.
John Weinberg: As we have discussed throughout the year, we expect to see activity levels continue to gradually increase over the coming months and into next year. However, the exact timing of when that impacted financial results. It's hard to pinpoint as this uncertainty could impact the timing of transaction announcements and closings.
Is the M&A market looks poised to return to more normalized levels. The investments we've made in our businesses have resulted in a stronger more diversified firm, which positions us for growth over the medium to long term.
John Weinberg: Turning to talent 2024 has so far been another successful recruiting year.
Year to date, eight investment banking senior managing directors and one senior adviser have started at or have committed to join the firm.
John Weinberg: Three of these eight S. M DS committed since our last earnings call and will be joining either later this year or in early 2025.
John Weinberg: We have a strong pipeline for external recruits and we are continuing to add high quality senior talent to our firm.
John Weinberg: Among the three newly committed Smbs, one will be building, a new product group focused on structured finance, while the other two will be joining our financial institutions and sponsor coverage teams respectively.
John Weinberg: Additionally, our new senior leaders in France started last month, and we are excited about increased levels of client activity in dialogues.
John Weinberg: Driving our expanded presence in Europe.
Our equities business, we've added to the depth of our research coverage with a top tier research analysts to lead coverage on the Fintech and services sectors.
John Weinberg: Now, let me briefly turn to the quarter.
John Weinberg: Despite typical summer seasonality and a rise in equity market volatility in late summer Evercore experienced strong activity in nearly all of its businesses in the third quarter.
John Weinberg: In strategic advisory we advised on a number of notable and complex transactions, including T. I H on the seven 8 billion sale of its retail insurance Broking Division Mcgriff insurance services to Marsh Mclennan.
John Weinberg: Avenue Capital Group, and Devine asset management on their $3 $4 billion sale of minority equity interest.
John Weinberg: In this draw vision to district Court and C V C. On its acquisition of a significant ownership position in Evercore from Clayton Dubilier <unk> Rice. These.
These transactions are representative of some of the areas, we've been investing in including financial services software energy transition and capabilities that serve our sponsor clients.
John Weinberg: The European Advisory team has gathered strength throughout the year with a strong third quarter.
John Weinberg: While we are continuing to see progress and improvement in the European M&A market is still lags the U S and uncertainty in the region remains.
In line with trends, we've seen in the second quarter, our financial sponsors business has continued to see internal dialogue levels build momentum.
John Weinberg: We believe that further interest rate cuts and continued pressure from Lps to returning capital will spur sponsor.
John Weinberg: Related activity.
John Weinberg: This is a critical driver to the broader M&A recovery.
John Weinberg: Our strategic defense business remains busy at global activist campaigns continue at historically high levels.
John Weinberg: The liability management and restructuring practice remains quite active as such we believe 2024 will be a strong year for this business.
John Weinberg: Liability management continues to be the primary driver of activity and we expect to see strong activity levels continue into 2025, even as the mercury market recovers.
John Weinberg: Our industry, leading private capital advisory businesses delivered another quarter of strong performance with a robust pipeline as we approach the year end.
John Weinberg: The continued success of this business has been in part due to our long standing relationships with G. P. S mlps and the decline in cash back to L piece from the drop in sponsor related portfolio company exits.
John Weinberg: While the fundraising market typically experiences a summer slowdown in the third quarter. Our private funds group is in dialogue with several new funds and activity for this group continues to broaden we expect fundraising activity to improve as M&A market levels continue to increase.
John Weinberg: The underwriting business and it's a quarter on a strong note as issuance activity increase in September.
John Weinberg: In the quarter, we were lead left book runner on Diamondback Nrg's $2 6 billion follow on offering which was the third largest U S follow on offering of the year and Evercore is largest lead left book run deal to date.
John Weinberg: It is clear that our commitment to broadening our sector coverage and enhancing our role in transactions yielding results.
John Weinberg: Notably we participated in the Tech IPO research and so far this year, having been a book runner in five of the eight U S Tech Ipos.
John Weinberg: We anticipate continued activity in the equity capital markets across the medium to longer term. However in the short term the upcoming U S election, coupled with normal seasonality may narrow windows of opportunity for issuers, we remain optimistic that the IPO market will be more active in 2025.
John Weinberg: Our equities franchise experienced the strongest third quarter in nearly a decade importantly, this month marks the 10 year anniversary of the Evercore ISI merger and we are pleased with the performance of this business has achieved over the last decade, expanding everquest threat and differentiating us from our peers.
John Weinberg: In wealth management.
John Weinberg: Our assets under management reached $13 9 billion, driven by strong market appreciation and client engagement.
Before I turn it over to Tim to discuss the financial results I want to wrap up with a few points.
John Weinberg: We continue to believe we are in a gradual recovery and we remain confident that both the market and our results will steadily improve as the market gains further clarity and confidence over the coming quarters.
As we look to 2025 and beyond we remain committed to the execution of our long term strategic roadmap, while carefully managing our expense base.
John Weinberg: As demonstrated by our recent hires this past quarter, we are committed to not only expanding our industry and geographic reach but also deepening and diversifying our product and coverage capabilities across adjacent areas.
John Weinberg: We continued to enhance our client coverage breadth and depths, including investments in covering large mid and small cap public and private companies as well as financial sponsors.
John Weinberg: We believe we are well positioned as the market recovers and are optimistic about everquest prospects in the years ahead with that let me turn it over to Tim.
Tim: Thank you John.
Tim: Our third quarter financial results are consistent with the gradual recovery. We have conveyed in recent earnings calls and are seeing in the markets and in our businesses.
Tim: We continue to make strategic investments in our firm and our balancing that with attention to expense management with our focus on providing exceptional client service and building value for our shareholders. We remain committed to improving our expense ratios recognizing that revenue growth also plays an important.
Tim: <unk> role in achieving.
Tim: We continue to expect gradual improvement in our margins over the near to medium term.
Tim: With that I will now discuss our third quarter financial results.
Tim: For the third quarter of 2024, net revenues operating income and EPS on a GAAP basis were $734 million $122 million and $1 86.
Tim: Expectedly.
Tim: My comments from here will focus on non-GAAP metrics, which we believe are useful in evaluating our results our standard GAAP reporting and a reconciliation of GAAP to adjusted results can be found in our press release, which is on our website.
Tim: Our third quarter adjusted net revenues of $740 million increased 28% versus the third quarter of 2023.
Tim: Third quarter, adjusted operating income of $135 million increased 63% versus the third quarter of 2023 <unk>.
Tim: Adjusted earnings per share of $2.04 increased 57% versus the third quarter of last year.
Tim: Our adjusted operating margin was 18, 2% for the third quarter up from 14, 4% in the third quarter of last year.
Tim: <unk> of approximately 385 basis points.
Tim: Turning to the businesses.
Third quarter adjusted advisory fees of $593 million increased 27% year over year, reflecting further improvement in macroeconomic and market conditions.
Tim: This is consistent with the number of advisory fees greater than $1 million, which rose by 30%.
Tim: Our third quarter underwriting fees were $44 million up 43% from a year ago, demonstrating improved diversification across sectors and active engagement and several large high profile of follow ons.
Tim: Commissions and related revenue of $55 million in the third quarter, nearly our strongest third quarter to date in this business.
Tim: Was up 12% year over year, reflecting strong trading commissions and subscription fees.
Tim: Third quarter, adjusted asset management and administration fees of $21 million increased 14% year over year, primarily driven by a record a U N, which benefited from market appreciation during the quarter.
Tim: Third quarter adjusted other revenue net was approximately $26 million, which compares to $10 million a year ago.
Tim: Approximately two thirds of the other revenue was interest income and about one third was a gain on our D. C. C P hedge.
Tim: Turning to expenses.
Tim: The adjusted compensation ratio for the third quarter is 66% compared to 68% a year ago, a 200 basis point improvement.
Tim: This quarter's ratio represents our best judgment of the accrual for this quarter taking into consideration our view of full year revenue and compensation expense when factoring in S. M D hiring head count levels expected market levels of compensation at year end.
Tim: <unk> and other relevant factors are.
Tim: Our third quarter results were consistent with our expectations for the quarter. Thus the compensation ratio remained stable relative to the prior two quarters.
Tim: As I mentioned at the outset, we are striving to make improvements in our comp ratio.
Tim: However, we also continue to invest in building our firm and saw improvements will occur across the near to medium term.
Tim: Non compensation expenses in the quarter were $117 million up 15% from a year ago and.
Tim: And the adjusted non comp expense ratio for the quarter is 15, 8% compared to 17, 6% a year ago.
Tim: An improvement of 180 basis points.
Tim: Non compensation expense increase from a year ago is primarily driven by three items first an increase in travel and related expenses as client related travel continues to normalize second professional fees, which reflect higher recruiting and consulting fees as well as higher.
Tim: Client related activity.
Tim: Note that the reimbursement for certain clients expenses as reflected in the revenue line.
Tim: Third communications and information services expenses related to technology expenses for existing and new platforms as well as increased rates and subscription costs related to higher head count.
Tim: Our non comp expenses on a per employee basis were up 9% versus the prior year, but down nearly 8% from the prior quarter.
Tim: And historical context, our non comp expense per employee is up less than 6% compared to third quarter in 2019 free.
Tim: Pre COVID-19 here.
Or a compound annual increase of about 1.1%.
Tim: We have made improvements on our non comp ratio over the last three consecutive quarters and we expect to continue to do so into year end.
Tim: Our adjusted tax rate for the quarter was 28, 9% compared to 27, 6% in the third quarter of last year.
Tim: Turning to our balance sheet.
Tim: As of September 30th our cash and investment Securities totaled $1 8 billion, which is approximately 200 million higher than last year's level at this time.
Tim: And the first nine months of the year, we returned a total of $529 million to shareholders through dividends and repurchases of $2 2 million shares at an average price of $189 69.
Tim: Of which approximately 400000 shares were repurchased in the third quarter.
Tim: And the first nine months of this year, we have returned more capital than we did throughout all of 2023.
Tim: And we remain committed to our capital return philosophy.
Tim: Our third quarter adjusted diluted share count was $44 5 million up from $43 4 million in the prior quarter.
Tim: An increase of $1 1 million shares.
Tim: Increase in our share count was largely due to the impact of our higher share price on the Unvested Awards, which are accounted for under the Treasury stock method and.
Tim: And the vesting of previously issued awards offset by buybacks.
Tim: It is important to note that from quarter to quarter significant changes in our average share price can have a material impact on the adjusted diluted share count.
Tim: This was apparent from the second quarter to the third quarter as our average share price increased 22% from $194 59 to $238 and Tucson.
Tim: As we have stated before.
Uncertainty in the economic and geopolitical environment remain we believe we are in the midst of a gradual recovery and that internal and market indicators, coupled with improvement in the macro backdrop position evercore well for the remainder of 2024 and beyond.
Speaker Change: That we will now open the line for questions.
Thank you we will now conduct a question and answer portion of the conference. Please limit to one question only.
Speaker Change: Welcome to rejoin the queue for additional questions time permitting again in order to ask a question. Please press the star key followed by number one on your Touchtone phone. Our first question will come from Brendan O'brien with Wolfe Research. Please go ahead.
Brendan O'brien: Good morning, and thanks for taking my question I guess I just wanted to touch on the comp ratio I understand there's a lot of factors in forming the comp decision in any given year and that youre still dealing with elevated deferrals and recruiting expense from prior years.
Brendan O'brien: But looking at the year to date results. Your revenues are up around 22%, but your comp ratio versus the full year 'twenty three levels is only down about 150 bps, implying an incremental comp ratio of a little under 60% year to date. So.
So as we think about the trajectory of the comp ratio and the path to getting back below 60% from here I was hoping you could help frame what the incremental comp margins should look like is that you know.
Brendan O'brien: <unk> level, the right way to think about that gradual improvement or anything that you could help us think through that path would be great.
Speaker Change: Yes, Thanks, Brian.
Brendan O'brien: When we think about the comp ratio.
Brendan O'brien: <unk> commented in previous quarterly calls.
Brendan O'brien: And then <unk>.
Brendan O'brien: Commentary on this earnings release.
Brendan O'brien: That.
Brendan O'brien: Improvement there is a gradual thing which I pay.
Brendan O'brien: Eric drives is happening over the near to medium term and so.
Brendan O'brien: Last year for the overall year, a comp ratio of 67, 6% for this quarter a year ago, It was 68% and so.
Brendan O'brien: There's 160 basis point improvement year to date on the <unk>.
Brendan O'brien: Overall versus last year, and 200 basis points versus the prior year also.
Brendan O'brien: I noted that.
Brendan O'brien: We're balancing.
Brendan O'brien: Building the FERC.
Brendan O'brien: And we're building heading into what we think is an improving market.
Brendan O'brien: And so we're balancing building the firm to create long term shareholder value.
With.
Brendan O'brien: With achieving some improvement on our comp ratio.
Brendan O'brien: I also would make the point that.
Brendan O'brien: The competition for bankers.
Brendan O'brien: Remains intact.
Brendan O'brien: The associated cost of hiring new bankers and retaining existing bankers continues to be significant.
Brendan O'brien: And so when we take all that into consideration I think the right way to think about our comp ratio is something upon which we're hoping to make and striving to make.
Brendan O'brien: Gradual improvement over time, but not dropping down to the kinds of levels. You cited in your question in the near term.
Speaker Change: Great. Thanks for taking my question.
Yeah.
Speaker Change: Thank you we'll take our next question from Brian Kenney with Morgan Stanley. Please go ahead.
Brian Kenney: Hi, good morning, Thanks for taking my question.
Brian Kenney: Can you give some color on the size of deals in the pipeline specifically how long our companies to look at large cap M&A is there any uptick in appetite there and our deal value is going to be naturally higher this cycle, given we've seen such substantial growth and global equity market cap and GDP over the last few years.
Brian Kenney: We.
Speaker Change: In our pipeline have deals of all shapes and sizes. The pipeline is quite robust right now and so we really and the way we cover companies is really up and down the line and so we do cover.
Speaker Change: Bigger companies and there's a lot of activity with respect to.
Speaker Change: The overall mark merger market and I think that you should expect that there will be some sizable deals.
Clearly some of the sizeable deals will be impacted by the regulatory environment, which is somewhat uncertain. At this time, but I think you can assume that the activity level will be high that there will be activity up and down the size ranges and that there will be.
Speaker Change: A substantial number of larger deals and I think thats just.
Speaker Change: Part of how the market is going to recover I don't think theres going to be a bias towards small deals coming first or large deals coming first I think it's going to be overall as the market's kind of lift by itself kind of across the board.
Speaker Change: One other statistic I might add to that is if you.
Speaker Change: You look at year to date.
Speaker Change: Transactions over $1 billion.
Number.
Speaker Change: 26%.
Speaker Change: And so the good news is we are seeing some return certainly of the $1 billion plus transactions.
Thank you.
Speaker Change: Thank you we'll take our next question from Jamie <unk> with Goldman Sachs. Please go ahead.
Speaker Change: Good morning, and thanks for taking my question.
Speaker Change: John I was hoping you might be able to offer a bit of an update on the cadence of the advisory recovery I ask in particular, because at least per geologic your backlogs like your peers have come down a little bit in recent months.
What do you see this is driven by and does this mean there is the potential for a less than normal fourth quarter uptick this year and then maybe as a corollary could you speak to <unk>.
Speaker Change: Election impacts if there are any right now.
Speaker Change: We think the recovery will.
Speaker Change: It will be gradual having said that our backlogs are robust.
Speaker Change: Engagement letters conflict checks and all the things that support the backlogs are robust also so we see that there is a real activity brewing inside the firm I don't know when those will come through but we're feeling that there is just a very very healthy activity inside the firm.
Speaker Change: And we also think that whereas they may it may be gradual in terms of how they get booked announced and how they get executed and closed.
Speaker Change: We think that the activity levels are.
Really at a quite a high level and frankly, that's across the firm. If you look at if you look at the industry groups and really that the classic M&A activity.
Speaker Change: Both in the U S and in Europe.
Speaker Change: That's quite fulsome.
Speaker Change: But also in really virtually every business at the firm we have very healthy.
Speaker Change: Backlogs and activity brewing so from our standpoint, we are incredibly busy inside the firm and we're we're optimistic over at how this is going to play out over the balance of the year and then the 25.
Speaker Change: Okay.
Speaker Change: Now in terms of the election.
Speaker Change: Where we're not sure how really the impact of the election, we do know that in the medium term or short term elections going to actually be somewhat.
Speaker Change: Okay.
Speaker Change: A an influence which will which may have people.
Speaker Change: Really hesitate to do anything until they see how both the election turns out and really where the market reacts with respect to the election, but we don't think in the medium term that the election is going to impact the merger activity clearly the regulatory environment could.
Speaker Change: Depending on really how that really comes out of the election in which administration.
And which had minutes.
Speaker Change: And when the administration is in what they how they want to play.
Speaker Change: The regulatory environment, but but in our in.
Speaker Change: The way we're planning for it and then way we are thinking about it it's not going to have a broad impact the bigger deals could be impacted if the regulatory environment remains restrictive.
Speaker Change: But in the middle market and beyond those are much less impacted.
Speaker Change: Yes, James one other point I'd add on the backlog is just of course whats available to the outside world into the research community is looking at transactions that are announced but not yet closed merger transactions, whereas of course with the backlog. We look at we're looking at transactions that have been.
Speaker Change: But in many cases, not yet announced.
Speaker Change: And the second point on the backlog is recall that a significant portion of our advisory business is also non M&A, which does not get picked up in the backlog you'd be looking at.
Speaker Change: Thanks, a lot.
Speaker Change: One it's one more thing that I would just say is that with respect to backlog.
Speaker Change: One of the things that is an important part of how the <unk>.
Speaker Change: Market really returns is the sponsor business and there isn't a lot of backlog in the with respect to the sponsor business and but I would just tell you that the activity levels.
Speaker Change: With sponsors right now is as robust.
Speaker Change: Thank you we'll move next to Brennan Hawken with UBS. Please go ahead.
Speaker Change: Good morning, and thank you for taking my question. This is Ben Rubin filling in for Brandon.
Speaker Change: In your prepared remarks, you sounded rather optimistic on restructuring momentum continuing into 2025 I was just hoping you could drill down on the restructuring performance during the third quarter and was activity last quarter in line with kind of what you've been seeing year to date.
Speaker Change: And lastly has the start of rate cuts in the U S shifted client dialogues at all with respect to the need for say capitalizations or bespoke financing. Thank you.
Speaker Change: Sure. Thank you for the question.
Speaker Change: The restructuring business is actually very very busy right now.
Speaker Change: Very active and what we're seeing is no. There's been no slowdown in fact, I think we're really at a very high level of capacity right now and really have been.
Speaker Change: The business is healthy there is a lot going on as we've said in the past the business of Reis the restructuring business is really.
Speaker Change: Two very large extent about liability management.
Speaker Change: And we've been spending a lot of time with clients.
Rates going down, it's not going to from our standpoint kind of slowed down.
Advisory assignments and the execution of strategies that come out of that and.
Speaker Change: And Thats why when we said in our remarks that we don't think that.
Speaker Change: Picking up merchant environment.
Speaker Change: Nor a rate cut environment, it's kind of slowed down our restructuring business from what we can see the visibility that we have we see that that business continuing to perform well well into 'twenty five.
Great. Thank you for taking my question.
Speaker Change: And once again as a reminder that is star one for your questions.
Speaker Change: We will take our next question from Jim Mitchell with Seaport Global. Please go ahead.
Jim Mitchell: Hey, good morning, maybe.
Maybe just on the ECM business, there's been a lot of volatility in the environment right. We had record levels. In 2021, you had record revenues. It's been a challenge since then picked up this year, but you've invest underneath that you've been investing pretty heavily to grow that business. So where do you think you are from a market share perspective, and then the next up cycle.
Jim Mitchell: Where you think you can be just trying to get a sense of the upside and growth as that business picks up particularly on the IPO side sure.
Speaker Change: Sure. Thanks for the question.
Speaker Change: We see our equity capital markets business really gaining momentum.
Speaker Change: We have we have a goal of being inside the top 10.
Speaker Change: Think we're right around 11 right now.
Speaker Change: And we think that our activity is becoming much broader in terms of our reach.
Speaker Change: Several years ago, we were more of a biotech firm on equity Kevin a market that continues to be a strength of the firm, but we've broadened out quite a bit.
And if you look at the the eight Ipos in tech deals over the last year, we've been in five of them as a book runner.
Speaker Change: We are just expanding our reach we are building our capital markets area and also our approach to covering clients with respect to equity throughout.
Throughout we've added many sectors, where we really are covering those companies. So we see that happening we think our momentum is going to be good.
Speaker Change: We think that the market is going to be picking up we think the IPO market will pick up and we think that our capabilities.
Speaker Change: And our value add to clients.
Speaker Change: It's just growing and so over time, we're optimistic about that business, we really like the people, we have applying to that business and I think that from our perspective.
Speaker Change: It's a it is a real potential growth area for us and we plan that.
Speaker Change: That will be the case.
Speaker Change: Okay. Appreciate it thanks.
Speaker Change: Yeah.
Speaker Change: Thank you we will take our next question from Devin Ryan with citizens JMP. Please go ahead.
Devin Ryan: Thanks, Good morning, John Good morning, Tim.
Devin Ryan: Question on private capital Advisory clearly been a great growth story for Evercore or do you have a tremendous business there and it seems like it's operating at very high level right now even with sluggish M&A. So I wanted to just get a little bit of a sense around how you're thinking about the growth profile of this business from here and the capacity to do more.
Devin Ryan: More with the current group versus needing to add more talent to drive revenue growth.
Devin Ryan: I'm trying to understand is this still an up into the right story or would you be pleased with.
Devin Ryan: Kind of holding the line on the level of contribution right now thanks.
Speaker Change: We think it's up into the right.
Speaker Change: It's a business that is doing very well and strengthening and as you know we have a we have a whole complex of advisory businesses for sponsors whether it's private capital advisory business that we call whether it's the private funds group, which raises funds for them, whether it's really assisting and advising GPS in terms of steak.
Speaker Change: Whether it's doing the M&A side of sponsors and really we think we're going to build and one of the things that we've talked about on this call that I think is really important is we've really really bridged. These businesses and we are finding real synergy from the strengths of each of these businesses and really how we can provide serve.
Speaker Change: Just to the sponsors we think that that what we are providing sponsors now is a real comprehensive advisory.
Speaker Change: Approach, which we think is really helping and it's giving us more access and many different respects. So we're feeling good in terms of the specific PCA business. It is.
Speaker Change: Obviously performing very well.
Speaker Change: This product that they provide whether it's the continuity funds, which has obviously over the last three or four years been very successful that continues at a very high level.
Speaker Change: And the pace and the number of transactions and the backlogs are very strong there.
Speaker Change: But also the LP base business, which has filled dramatically.
And really all the other products that clearly are around that that ecosystem really continue to build so that business is continuing to to not just perform but to grow.
Speaker Change: Okay, great. Thanks, so much.
Speaker Change: Yeah.
Speaker Change: Thank you we'll take our next question from Adrian Hall with <unk>. Please go ahead.
Speaker Change: Great. Thanks for taking my question John.
Adrian Hall: John I heard in your prepared remarks comments about sponsor activity.
Adrian Hall: The same time it feels like this is kind of another quarter, where activity hasn't really come to fruition at the same velocity that was initially expected so I'm.
Adrian Hall: Just curious if you can provide us with the latest that you're hearing from your sponsor clients and what is really holding up this pent up demand that we continue to hear about <unk>.
Adrian Hall: Absolutely.
Adrian Hall: We're thinking about this a lot because we believe that.
Adrian Hall: Sponsors.
Adrian Hall: Business in the pickup in that market will actually fuel.
Adrian Hall: Okay.
Adrian Hall: Quite a bit the merchant market recovery.
We think that the that the business on the sponsor side is gathering steam now some of the evidence of that it's not really a.
Adrian Hall: Apparent at this moment.
But really what we are seeing is that activity levels have increased.
Adrian Hall: But certainly off a very low base.
There is real pressure to get this business growing for the sponsors they've got a lot of dry powder.
Adrian Hall: That dry powder needs to go to work.
Adrian Hall: <unk> have been putting a lot of pressure on sponsors to really start to let them re circulate capital and as a result, there is there is a lot of incentive for the sponsors to do deals.
Adrian Hall: From our own.
Adrian Hall: Dialogues, we see that the spread between buyers and sellers starting to narrow.
Adrian Hall: The activity levels inside our firm are very high we have we have we have a tremendous number of real dialogues going on with sponsors.
Adrian Hall: Have a large number of bake offs that we have in the hopper that we are in the process of executing on right now.
Adrian Hall: That bake off level is any indication there is a real pickup in really how this is going to play out but.
Adrian Hall: These activities really won't translate until into 25, but we see that the activity levels have clearly picked up.
Speaker Change: Great. Thanks.
Speaker Change: Thank you we'll take our next question.
Speaker Change: For.
Speaker Change: Mike Brown with Wells Fargo. Please go ahead.
Mike Brown: Hi, good morning.
Mike Brown: I wanted to dive into Europe, a little bit here. So hires in the advisory business. This quarter. We are focused on on Europe with two ads in Paris.
Mike Brown: Just give us an update on how large that franchise is now by MD head count are you still expecting to invest in and grow there where you're kind of focused on investing next and then.
Mike Brown: Understanding that the recovery there likely lagged the U S. I guess, what I would be interested to hear about that was how it progressed and where are you seeing some good activity near term.
Mike Brown: And how could that trend overtime. Thank you sure.
Speaker Change: What we've what we've always said is that that Europe is a very important strategic investment for us and we are we have every intention of continuing to evolve and grow that business.
Speaker Change:
Speaker Change: <unk> pleased with the progress we are having.
Paris, we hired three.
Speaker Change: Very strong players in it.
Speaker Change: Senior adviser as well as two.
Speaker Change: Senior managing directors.
Speaker Change: We've added in the telecom side, we've added regionally.
In addition to Paris in Spain.
Speaker Change: We are systematically looking for high quality talent.
Speaker Change: And we are recruiting that talent and bringing it in.
We believe that we've got real momentum in that business, we're winning really strong assignments.
Speaker Change: On the third quarter.
The European business has been good.
Speaker Change: And and increasing.
Speaker Change: And I think that what you will see from US is a continued significant investment in Europe, we won't do it in.
Speaker Change: Big huge numbers, we're going to do it as we always have.
Speaker Change: One by one basis, but we have a very healthy backlog of high quality people, we're talking to.
Speaker Change: Have a number of sectors that we continue to focus on focus on we're bringing some of our really high quality products in increasingly into Europe. So we see Europe as a very significant upside to the firm.
Speaker Change: We feel really good about where they're going they're energy level their commitment that the way we're approaching the business.
Speaker Change: All very very positive from our standpoint so.
Speaker Change: Europe is.
Speaker Change: I'd say, a bright spot for us and one that's going to continue to get our focus.
Speaker Change: Yeah.
Yeah.
Speaker Change: And we will take a follow up from Hayden Hall with <unk>. Your line is open.
Speaker Change: Yes.
Speaker Change: Great. Thanks for the follow up.
Speaker Change: And then maybe just one on the comp ratio if I just look at the.
Speaker Change: Recognized Rs you in deferred cash comp year to date.
Speaker Change: It's down as a percent of revenue Sandra.
Speaker Change: Couple of percentage points, which would almost largely attribute.
Speaker Change: All of the comp leverage.
Speaker Change: Year to date versus 2023, so I'm curious to hear how you're thinking about leverage in base salaries and bonuses and 24 versus 23 and the 66% for the year.
Our best estimate for the year, what is kind of your expectation right now for the fourth quarter that's embedded in that.
Speaker Change: Right.
Speaker Change: Thanks for the follow up.
Speaker Change: I think the right way to think about this is that the.
Speaker Change: The comp ratio itself.
Speaker Change: <unk> has a significant number of components to it.
Speaker Change: And.
Speaker Change: And some of the components.
Speaker Change: Have comp leverage and others less so and so.
Speaker Change: Yes, but there are significant areas within that comp ratio that would include.
Speaker Change: For example, as you cited the base and benefits right that doesn't go up when revenues goes up.
Speaker Change: You got corporate staff, which tends to not go up as much.
Speaker Change: I would say that on average.
Speaker Change: And the industry non partner.
Speaker Change: Bonuses go up during periods of high revenue, but not as much.
Speaker Change: Generally as partners, who who tend to have more volatility in their compensation and so on so there are there are areas of compensation level and then those.
Speaker Change: In addition to that there are things like partner hiring and we've invested very heavily in that last year, we have invested heavily in it this year.
Speaker Change: And what we're focused on.
Speaker Change: Is increasing EPS and increasing cash flow per share and building overall value. If if the objective were to simply minimize the comp ratio that'd be very easy we would just stop hiring has stopped growing tomorrow.
Speaker Change: You'd see lots of expansion and so what we're really focused on here is <unk>.
Speaker Change: Some investment in the company so that we can build the firm and built and create value.
Speaker Change: In the long in the long run and in the medium term.
Speaker Change: And there are no further questions at this time with that this will conclude today's Evercore third quarter 2024 earnings Conference call you may now disconnect.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Hum.
Speaker Change: Uh huh.
Speaker Change: Yeah.
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John S. Weinberg: John Weinberg, Devin Ryan, James Mitchell, Steven Chubak, Ryan
Speaker Change: Okay.
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